U.s. Should Let Airlines Merge, Union Leader Says

[nycbusdriver]

Perhaps the problem is that you read too much into the word "deregulation." Specifically, airline deregulation refers to the removal of the government's proactive control over routes and fares. That the airlines are still subject to regulations that affect all business in the US is really beside the point.

[post="251329"][/post]​

Except that airlines seem to be subject to much closer scrutiny under those laws that affect all US businesses. Huge phone companies want to merge? Sure, why not! Huge retailers? Have at it! Banks? Be our guest! Daimler wants to buy Chrysler? Wilkommen!

Are there any mergers that the DOJ has stopped in recent memory, other than US/UAL?

(Don't get me wrong. I am eternally grateful that the merger didn't take place in 2001, and pray fervently every day that a US/UAL never happens.)

But the DOJ seems to have a morbid propensity to make airlines jump through lots of hoops (and even then deny permission) and let every other industry just slide.

 

[mweiss]

Well, now, Verizon was formed after some very detailed scrutiny that required them to jettison various elements of the business (GTE's ISP, for example). That was pretty close to the same time that US/UA was proposed.

These things go in cycles.

 

[nycbusdriver]

Well, now, Verizon was formed after some very detailed scrutiny that required them to jettison various elements of the business (GTE's ISP, for example). That was pretty close to the same time that US/UA was proposed.

These things go in cycles.

[post="251406"][/post]​

Yes. Point taken. But Verizon got the go ahead after the mandated jettisoning.

USAirways, on the other hand, began to dismember itself at the behest of the DOJ and still got slammed with a disapproval.

 

[mweiss]

IIRC, DOJ didn't have a final answer by the time US/UA dropped it. Is my memory failing?

 

[RowUnderDCA]

It's a matter of continual dispute. My perception of the even at the time is that UAL wanted out BEFORE the DOJ had made a determination but U or U's investors insisted on a determination, but by that time, UAL was no longer cooperating with concessionary proposals. The b'crats at Justice new that the path of least resistance was a denial. I think there were some payments between the parties that were in dispute.

 

[whatkindoffreshhell]

Tilton says the government should 'just get out of the way' -- does he include the federal court now protecting his carcass?

The feds should call Tilton's bluff and publicly tell him to go cut a deal. See who is interested in merging with UA.

Sad to see that once again UA management is betting on a longshot.

 

[nycbusdriver]

IIRC, DOJ didn't have a final answer by the time US/UA dropped it. Is my memory failing?

[post="251434"][/post]​

It's a matter of continual dispute. My perception of the even at the time is that UAL wanted out BEFORE the DOJ had made a determination but U or U's investors insisted on a determination, but by that time, UAL was no longer cooperating with concessionary proposals. The b'crats at Justice new that the path of least resistance was a denial. I think there were some payments between the parties that were in dispute.

[post="251436"][/post]​

Row is right. United got queasy well before the DOJ ruled, but the DOJ did issue the ruling killing the deal. UAL had signed a contract to do the deal, USAirways held them to it, and the DOJ finally nixed it with their ruling.

 

[nycbusdriver]

Row is right. United got queasy well before the DOJ ruled, but the DOJ did issue the ruling killing the deal. UAL had signed a contract to do the deal, USAirways held them to it, and the DOJ finally nixed it with their ruling.

[post="251512"][/post]​

I stand corrected. The NYTimes, on July 2, 2001, reported that it was, in fact, United that pulled the plug:

"Facing what it believes to be intractable opposition from federal antitrust regulators, United Airlines has decided to abandon its proposed $4.3 billion takeover of US Airways, an executive at the airline said yesterday. ... The move ends a bold bid by United to create an airline giant that would have... "

 

[mweiss]

That's what I thought. Otherwise, UA would have had an "out" that would have saved them from paying the penalties to US.

 

[RowUnderDCA]

My opinion was and still is that if UA had wanted a deal, they could have had one. But after the whole, "let's split the shuttle thing and give the F100s to American"-thing didn't work, they stopped 'negotiating' with DOJ mostly because the price was too high.

 

[USA320Pilot]

On July 12 UAL Corp. and US Airways jointly submitted their 21-day Hart-Scott-Rodino Act notice to the Justice Department. This notice advised the government of the airline’s intent to complete the proposed transaction and required the regulators to render an antitrust opinion by August 1. Regulators told sources that UAL submitted the final requested documentation to the Antitrust Division on July 13 and the parties genuinely tried to complete the deal.

On July 23 all interested parties met in Washington at the Department of Justice and the airlines aggressively lobbied the federal government to not oppose the transaction. The parties in attendance included airline senior management (from UAL, US Airways, AMR, and DC Air), the company’s antitrust attorneys, States Attorneys Generals from Pennsylvania, New York, and Maryland, Senator Arlen Specter (R-PA), and the Justice Antitrust Division staff lead by Deputy Attorney General for Antitrust Hewitt Pate.

Reports indicate both UAL and US Airways aggressively sought to complete the deal, but no one knows for sure if UAL’s efforts were designed to complete the transaction or to avoid a potential breach-of-contract lawsuit. Nonetheless, Pate was said to be a “problem solver†versus “problem maker†and he tried to broker a deal that the federal government believed was within established M&A guidelines and case law. The airlines had no choice but to submit the original UAL-US Airways MOU, amended by the UAL-AMR Corp. January 9 agreement, to complete the transaction by the August 1 termination date, because any material change would require up to another four month regulatory review per M&A law.

During the July 23 meeting at the Justice Department reports indicate Pate offered a solution for the deal to proceed with a government “no action†letter. The proposed changes included eliminating DC Air, selling Washington National gates/222 slots to an established carrier(s), if this carrier was AMR eliminate the Shuttle Joint Venture/limits on American Airlines growth to permit AMR to create its own independent Shuttle, and sell approximately 15 PHL gates to provide effective competition for both the post-merger route monopoly/duoply issue.

Reports indicate UAL was agreeable to the governments requirements provided there would by no labor interference. Why? Simply put UAL found itself in a “catch 22â€. The Chicago- based airline was projected to lose over $1 billion during the year, it was experiencing a serious increase in costs, like other airlines has witnessed a stunning year-over-year revenue loss of approximately 10%, and had limited access to the capital markets. With open labor contracts for the mechanics and ramp workers, coupled with the AFA mid-term wage increase demands/scope clause issue, UAL could ill afford to complete the transaction and pay $4.3 billion for US Airways (minus the capital obtained from the post-merger divestitures) plus assume $8.1 billion in debt, if the airline was going to face continued labor unrest.

Reports indicated UAL chairman Jim Goodwin approached the unions about UAL’s predicament and the IAM was generally agreeable, but the AFA was not. The AFA said they would support the transaction and waive their scope agreements provided the company would provide the Flight Attendants with a pilot type wage increase of 20%. The company rejected the AFA demand and when the union filed its lawsuit in U.S. District Court on July 26, UAL could not accept the governments brokered plan to complete the merger transaction(s) and the deal(s) collapsed.

Faced with no alternative and the airlines request to have the regulators announce their decision by July 27, the government was forced to issue its press release announcing it would seek injunctive relief to block the merger if the airlines attempted to complete both the UAL-US Airways and UAL-AMR transactions. In response, the airlines elected to jointly terminate the MOU and US Airways agreed to accept the $50 million termination fee. These two steps eliminated a US Airways potential breach-of-contract lawsuit and there was widespread speculation US Airways will not seek damages because the airline did not want to jeopardize any future relationship with United Airlines. Nonetheless, immediately after announcing the deals joint termination UAL surprisingly issued a “curious†statement.

The airline said, "UAL Corporation intends to work with US Airways to determine the appropriate steps that need to be taken now that US Airways has acknowledged that the merger with United will not go forward.†This statement has increased speculation the airlines may at some point revisit a corporate transaction, but before that could be accomplished both carriers needed to rectify a number of outstanding issues, but that too was superseeded by September 11, which through the entire industry in chaos.

Clearly senior management at both airlines were disappointed in their inability to complete the deal and the potential or maybe even the liklihood of another deal could be just over the horizon.

Regards,

USA320Pilot

 

[mweiss]

Thanks for the additional info. Guess the answer depends on perspective.

 

[ClueByFour]

Thanks for the additional info. Guess the answer depends on perspective.

[post="251572"][/post]​

Absolutely. It's what happens when you taxi by the left seat of a 777 in ORD from the right seat of a 319 and wish to change perspectives.

 

[BoeingBoy]

That the airlines are still subject to regulations that affect all business in the US is really beside the point.

[post="251329"][/post]​

Except for possibly the kid's lemonade stand, all business in the US (and much of the world) is regulated by the multitude of alphabet agencies in DC and the state capitals. Airlines are no different.....

Jim